Difference Between Cheque and Promissory Note
Difference between cheque and promissory note has been discussed in this article. Payment can be made in cash, online, cheque, bill of exchange, promissory note or other forms.
Difference between cheque and promissory note is nothing but carrying cash every time for any transaction is risky, therefore, people seek negotiable instruments for secured payments like cheques, bills of exchange or promissory notes.
Therefore, in this article we have discussed the difference between cheque and promissory note as below;
|Meaning of Cheque can be defined as ‘Cheque is an instrument that one individual/party orders the bank to transfer the money to the bank account of another individual/party in whose name the cheque has been issued.’
|Meaning of Promissory Note can be defined as ‘A promissory note is an instrument given in writing with an unrestricted guarantee to pay a certain amount of money to a certain person or to the bearer of the instrument and signed by the person who has been making the promissory note.’
|The definition of a Cheque has been defined under section 6 of the Negotiable Instruments Act, 1881.
|A Promissory Note has been defined under section 4 of the Negotiable Instruments Act, 1881.
|A cheque can be defined as ‘A cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand. It includes the electronic image of a truncated cheque and a cheque in the electronic form.’
|The promissory note can be defined as ‘A Promissory note is an instrument in writing (not being a bank note or a currency note) containing an unconditional undertaking, signed by the maker, to pay a certain sum of money only to, or to the order of, a certain person, or to the bearer of the instrument.’
|In a successful cheque transaction, there are mainly three parties; These are – 1) Drawer, 2) Drawee, and 3) Payee.
|In a successful transaction of a promissory note, there are mainly two parties; These are – 1) Maker and 2) Payee.
|A cheque can be drawn only by the account holder of a bank.
|A promissory note can be made by any individual/party.
|In a cheque, an order for payment is given to the bank.
|In a promissory note, there is a promise to pay.
|A cheque is generally valid for six months.
|Whereas, a promissory note is valid for 3 years from the date of its execution after which it becomes invalid.
|A cheque is an instrument that is always payable on demand.
|A promissory note is an instrument that can be payable on demand or after a specified period.
|In a cheque, three days grace period is not given.
|In a promissory note, three days of the grace period are given in promissory notes payable after a specific period.
|In a cheque, the drawer and payee may be the same person.
|In a promissory note, the maker and the payee/drawer may not be the same person.
|For cheques, no stamps are required to be affixed.
|For promissory notes, stamps are required to be affixed.
|A cheque can be crossed.
|Whereas, it is not mandatory the crossing the promissory note.
|The drawer of a cheque is called ‘Creditor’.
|The drawer of a promissory note is called ‘Debtor’.
|In a cheque, the parties remain liable to pay even though no notice of dishonour is given.
|On a promissory note, the liability of the drawer is primary and absolute.
- Who can cross a cheque?
- Meaning of Cheque Bounce and Cheque Bounce Reasons
- How to write legal notice for cheque bounce?
Frequently Asked Questions
What is the difference between cheque and promissory note PDF?
The difference between cheque and promissory note can be defined as “Cheque is an instrument that one individual/party orders the bank to transfer the money to the bank account of another individual/party in whose name the cheque has been issued”. “The promissory note contains an unconditional promise to pay a certain sum of money on a certain date”. In India, these instruments are governed by the Indian Negotiable Instruments Act 1881.
Is a promissory note the same as a check?
You will likely be familiar with two other commonly used negotiable instruments: checks and money orders. While a promissory note involves two parties (the payer and the payee), checks involve three parties (the payer, the payee, and the bank from which the funds are drawn).